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Leadership Implications of Business-IT Convergence

Vaughan Merlyn argues that the goal of IT-enabled enterprises is no longer Business-IT Alignment, but Business-IT Convergence. He not only gives an historical perspective to this argument, but discusses the implications of this trend for business and IT leaders alike.

For many years, the annual surveys of CIO issues have listed business-IT alignment in the top 3. Alignment has been a challenging, but often elusive goal – but is it still a valid goal? For most organisations today, information and technology have become such integral elements of the business model that the goal has moved beyond Business-IT Alignment to Business-IT Convergence. The traditional distinctions between the specialist roles of the IT professional (analyst, developer, architect, integrator) and those of business line executives, managers and knowledge workers are breaking down. This shift has enormous implications for both business and IT Operating Models.

An historical perspective

Back in the late 1800s, many corporations employed Chief Electrical Officers. Nick Carr gets into this nicely in his aptly named book, The Big Switch.

“A hundred years ago, companies stopped generating their own power with steam engines and dynamos and plugged into the newly built electric grid. The cheap power pumped out by electric utilities didn’t just change how businesses operated, it set off a chain reaction of economic and social transformations that brought the modern world into existence. Today, a similar revolution is under way. Hooked up to the Internet’s global computing grid, massive information-processing plants have begun pumping data and software code into our homes and businesses. This time, it’s computing that’s turning into a utility.”

The shift from electricity as a highly specialised and centrally managed resource to a commodity took about a decade as standards such as voltage, alternating current, plug and socket configurations, and so on were settled. Once the standards existed, businesses could simply plug into a grid – electricity became a commodity, and the Chief Electrical Officers became as extinct as the Dodo.

There has been a similar evolution with computing and information services. The first commercial mainframe computers, the LEO, were created in 1951 by J. Lyons and Company, a British catering and food manufacturing firm. The idea of a food and catering company today designing and building its own computer is unthinkable! I remember in the late 1960s businesses such as Massachusetts General Hospital were creating their own programming languages, data base software and teleprocessing monitors – activities that would be considered wholly irresponsible today. I wonder if 15 years from now we will look back at the turn of this century and be bemused by the fact that typical companies of any size at all maintained IT organisations – in some cases, thousands of IT professionals – writing programs, tending help desks, managing server farms and data centres, and so forth.

So, what’s happening to the IT organisation?

Let’s drill further into this convergence phenomenon. Today, many IT activities, including project management, information analysis and application configuration, are devolving into business units while other activities such as global sourcing and organisational development are consolidating with support functions such as HR, Finance, etc. Helping drive this shift is the rapid consumerisation of IT devices and services, with iPhones, iPads, Blackberry Playbook, Android devices and the like becoming important windows into business systems and information.

Further driving convergence is the growing ‘IT Savvy’ and confidence with IT that business executives, line managers and workers (especially knowledge workers) increasingly feel. This is in part generational as highly IT literate people are now entering the workforce with the expectation that they will be well equipped with IT and allowed significant freedom of choice of devices and platforms. In part, it is a by-product of people’s personal engagement with the Internet – no matter what generation they represent – through social media, e-commerce and so on.

From owning to sourcing IT capabilities

The last decade or so has seen a shift from owning all required IT capabilities (data centres, server farms, software teams, application development groups, desktop support, etc) to sourcing these capabilities externally. Today, traditional functional outsourcing is being continuously expanded, and now often includes Business Process outsourcing as well as the outsourcing of compute power, data storage, IT infrastructure, applications and platforms through the meteoric rise of Cloud Computing.

Information is becoming both strategic and implicit

No matter what the nature of the organisation, information is becoming an increasingly strategic asset. There is a growing body of compelling research data showing how companies are successfully embracing and competing on business analytics. At the same time, data is also becoming implicit to business management and operations – increasingly shaping what the business manages and how it manages. In many respects, the context for IT today is becoming less about ‘T’ (technology) and more about ‘I’ (information). The ability to capture, integrate, interpret, predict and act is increasingly the holy grail of competitive advantage – and those roles belong in the business, not in a separate technology group.

So, where do IT capabilities belong?

Now, I’m on dangerous ground, because the answer depends on the nature of the business, levels of IT savvyness of business managers and knowledge workers, and their shared vision of how they want to deploy and manage information and IT. But, I do see a trend and would argue that many IT capabilities that have traditionally been the domain of IT specialists ultimately belong in business operations. For example:

Business Process Management

Business Analytics

Project Management

Satisfying Business Unit application needs.

Other IT capabilities will increasingly become part of the governance of the business and, as such, integral to mainstream business governance, as opposed to being separate from business governance. Such capabilities might include, for example:

Enterprise Architecture (which goes way beyond IT Architecture to include business process architecture and even the business Operating Model)

IT Strategy (which should be one or more dimension of Business Strategy)

Portfolio and Programme Management (addressing all forms of business change initiatives, whether or not they incorporate IT change – though it’s hard to think of business change initiatives today that would not include an IT component!).

And finally, some IT capabilities should be centrally coordinated and shared across the enterprise. Examples here include:

Common and shared IT Infrastructure

Enterprise Applications

So, what are the leadership implications of business-IT convergence?

The reality today is that most companies are not quite ready for the shift I’m espousing (and, indeed, predicting). I believe that visionary leaders do recognise the shift that is taking place and are looking for ways to accelerate their journey to business-IT convergence.

For this convergence journey to be a success it requires:

A strong partnership between the CIO and CFO to figure out and implement IT funding models that drive towards desired behaviours regarding information and IT.

Closer collaboration between the CIO and COO, possibly with the roles merging into one.

Immediate steps that can be taken include:

Redesigning the business and IT governance models for a converged enterprise.

Assessing the current governance models and practices against the future state model, and making adjustments to close gaps.

Forming a working group of business and IT leaders to identify the major information and technology roles and where they are ideally located – embedded in the business units or centrally located and shared. Defining the competencies needed to fill each role and ensuring that these competencies are developed within the appropriate resources.

Defining and deploying ‘rules of engagement’ for the various business-IT roles.

Ultimately, I believe this is an ideal opportunity for business and technology leaders to lead this transition and converge their IT and Business Operating Models in ways that anticipate the inevitable advances that are happening today. Cloud Computing, the consumerisation of IT and the emergence of the 2.0 Enterprise are examples we know of today, but more will emerge.